Revocable Living Trust Package A Revocable Living Trust Package will include your Revocable Living Trust, pour-over Wills, Durable Powers of Attorney for Health Care, and Durable Powers of Attorney for Management of Property and Personal Affairs. AB Trust An AB Trust consists of a Bypass Trust and is named as such because it avoids the imposition of estate tax at the death of the surviving spouse. Even though the surviving spouse receives income and other benefits from the trust, the IRS treats the property in the trust as not owned by the surviving spouse for estate tax purposes. Thus, the assets in the bypass trust, including any appreciation in value between the death of the first spouse and the death of the second spouse, pass to the heirs at the survivor's death totally free of estate tax. The AB Trust also consists of a Survivor's Trust. This is the share which receives the marital deduction share and the survivor's share. The surviving spouse retains the right to determine how these trust assets are distributed. QTIP It is a fact of life today that many people marry more than once. Remarriages can create complications when using - an "optimum marital deduction plan." In some optimum marital deduction plans, the surviving spouse has the ability to distribute all of the property received from the first to die by way of the marital deduction to whomever he or she wishes. In a situation where the first to die has children from a prior marriage, this may result in a surviving spouse passing some or all of the deceased spouse's property to persons other than the deceased spouse's children, such as transfers to the survivor's children from other marriages or to the survivor's new spouse. Recognizing this problem, Congress enacted a provision allowing the creation of a "Qualified Terminable Interest Property" Trust, often called a QTIP Trust. A QTIP Trust does not result in any additional tax savings in and of itself. It does, however, give the first spouse to die an ability to specify exactly who will receive his or her property at the death of the second spouse while at the same time the property qualifies for the marital deduction. With a QTIP Trust, the first spouse to die can arrange the trust so that after benefiting the surviving spouse, his or her estate will go to his or her children and not to the survivor's new spouse or friend, or to the surviving spouse's children from another marriage. QDOT QDOT stands for Qualified Domestic Trust and occurs when a person is not presently a U.S. citizen. Thus special precautions may be necessary to ensure that the Trust property will qualify for the federal estate tax marital deduction at death of the citizen spouse. Federal tax law currently requires that property given to a noncitizen spouse be in a trust having a U.S. citizen (or U.S. corporation) as a trustee in order that the property qualifies for the federal estate tax marital deduction. Basically, this requirement is so that the I.R.S. can collect, from either the trust or the trustee who is a citizen, the estate taxes due on the trust when your spouse dies. Therefore, your living trust document adds a provision that ensures that the Trust has at least one trustee who is a U.S. citizen (or U.S. corporation) if the non-citizen spouse has not become a U.S. citizen by the death of the citizen spouse or if no trustee is a citizen, this provision causes a cotrustee who is a U.S. citizen to be appointed to serve with the original trustee(s). Separate Share Trust A Separate Share Trust is called that because a separate trust is created for each of your children. However, a Separate Share Trust is only made for those of your children who are younger than an age that you determine at the death of the second of you to die; any older children get their shares of your remaining living trust property outright and the issue of a deceased child gets that share outright or in another trust. Sprinkling Trust A Sprinkling Trust is a trust created for your beneficiaries until the youngest living beneficiary reaches a certain age. During the existence of the Sprinkling Trust, the trustee is to pay income of the trust to (or for the benefit of) each of the beneficiaries in whatever amounts are proper for each beneficiary. Separate Share Trust for Issue The beneficiaries of this Separate Share Trust for Issue are either a deceased child's issue who are living when this trust is created and who are under the age you determine or if the deceased child has no living issue, your then-living issue who are under the age you determine. A separate trust is made for each beneficiary's separate share of your trust estate. Any potential beneficiary who is older than the age you determine get their shares of your trust property outright rather than in trust. Generation Skipping Trust A Generation Skipping Transfer is defined in the Internal Revenue Code and involves very complex tax issues. A tax, which is referred to as the generation-skipping transfer tax and is in addition to any other federal tax, is placed upon certain transfer of property. You have an exemption for all generation-skipping transfers you make during your lifetime or at your death. This exemption is $1,000,000.00 with upward adjustments for inflation for persons who die in calendar years after 1998. In order to ensure that your living trust document provides protection from some effects of the generation-skipping transfer tax, special provisions have been added that give the trustees of trusts created after your death by your living trust document certain instructions and suggestions on how to handle any transfer that is or may become generation-skipping. In addition to avoiding estate tax at the deaths of your children and possibly even your grandchildren, Generation Skipping Transfers confer additional benefits. For example, the child can act as his or her own Trustee, if appropriate, and thus control assets; all income can be made available to the child; the child can have the right to say where the property would go at his or her death; and Trust assets are protected from attacks by creditors or divorce courts. Charitable Remainder Trust A Charitable Remainder Trust is a trust designed for the benefit of a class or the public generally. It differs from other forms of trusts in large part because the class of beneficiaries is uncertain. Thus, to qualify as a Charitable Remainder Trust it must be for charitable, educational, religious, or scientific purposes. Remainder Purchase Marital Trust A Remainder Purchase Marital Trust is a method of transferring property into a non-revocable trust for the benefit of an individuals surviving spouse, essentially granting them an "income" interest in the property for a period of years or for his or her lifetime. However, the "remainder" interest in the property is sold to a third party (ie: the couple's children). This transfer allows the spouse's otherwise "terminable interest" to qualify for the gift tax marital deduction. This method of distribution has not been completely tested before the IRS but if it is allowed/approved, by the IRS, it would provide a vehicle for transferring property to a surviving spouse and children free of estate and gift tax. Grantor Retained Annuity Trust A Grantor Retained Annuity Trust occurs when a person (the "Grantor") transfers property to a non-revocable trust, retaining the right to receive an annuity amount for a certain number of years (the "GRAT Term") after which the property transfers to remainder beneficiaries. Upon formation of the GRAT, the Grantor pays gift tax on the value of the remainder interest as of the date of transfer. If the Grantor dies before the end of the GRAT Term, the value of the property in the GRAT at the Grantor's death ("GRAT Remainder") is included in the Grantor's estate and subject to estate taxes. The purpose for implementing a traditional GRAT is to avoid having the appreciation of the property transferred to a GRAT included in the Grantor's estate. The risk of implementing a GRAT is that the Grantor dies before the end of the GRAT Term. If he does, the value of the GRAT Remainder is included in the Grantor's estate. The goal of a "Guaranteed GRAT" is to remove this risk by having the Grantor's children (or other third party) purchase the Reversion Equivalent. Because the purchase price for the Reversion Equivalent is determined at the time the GRAT is formed, the purchase price should be far less than the actual value of the GRAT Remainder. ILIT An ILIT is an Irrevocable Life Insurance Trust. An ILIT is a trust form which cannot be revoked by the trustor once it is created. It is a trust established by one individual for the benefit of another. It differs from an AB Trust or a QTIP trust in that the individual that establishes the trust cannot act as the trustee of the trust.